June 21, 2012www.jegi.com

Since 1987

2012 SIIA Strategic and Financial ConferenceNew York, NY

The End of The World As We Know It: Innovation & Growth in Digital Services

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Discussion Agenda

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What to Do?

It’s The End of The World As We Know It

Waves of Innovation, Unprecedented Opportunities

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It Feels Like This Some Mornings...

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Uncertain Environment

Depressing Economic Data

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0

20

40

60

80

100

120

140

160

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Unemployment Rate Consumer Confidence Index

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Greece Debacle

Uncertain Environment

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6

Uncertain Environment

Media Bellwether Stocks Stagnant…

6…While Widely Anticipated New Issues Sink

‐30%

‐20%

‐10%

0%

10%

20%

30%

40%

Time Warner Inc.

The McGraw‐Hill Companies, Inc.

Thomson Reuters Corporation

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

Facebook, Inc.

Groupon, Inc.

Zynga

IPO Now

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Uncertain Environment

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Political Gridlock

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Uncertain Environment

Imminent Alien Invasion

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Uncertain Environment

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Isn’t this the “New Normal”?

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Uncertain Environment

The World is Always on the Brink of Disaster

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Discussion Agenda

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What to Do?

It’s The End of The World As We Know It

Waves of Innovation, Unprecedented Opportunities

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Waves of Innovation

Unprecedented pace of change creating new opportunities

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Socialization of

EVERYTHING

Mobile App Ecosystems

Cloud Storage

and Processing

Ecommerce Innovation

Technology Merges

with Marketing

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Waves of Innovation

Explosive growth of Social Media

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Users upload 72 hrs of video each minute

Hosts 140 billion photos, will add 70 billion this year

• Between the dawn of civilization  through 2003 5 Exabytes of information was created

• Now that much information is now created every 2 days

Eric Schmidt, Google 

400 million Tweets per day

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Socialization of EVERYTHING

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Entertainment

News

Games

eCommerce

...the social graph is changing industry after industry....

Business Networking

Waves of Innovation

What’s Next?

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• Big players are trying to adapt to social media marketing• Shifting marketing spend from traditional channels to below the line• Brands becoming the content creators – rise of content marketing• Traditional media companies and ad agencies racing to stay relevant

Socialization of EVERYTHING

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Waves of Innovation

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Socialization of EVERYTHING

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Waves of Innovation

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Waves of Innovation

Socialization of EVERYTHING

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Mobile Ads & Apps Explosion

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• 1 in 7 searches now on mobile; mobile search increased 4x in 2011• US mobile ads to reach $2.6 billion in 2012 and grow at 43% CAGR to 2016• Smart devices exploding courtesy of Apple – but here comes Microsoft

Source: Gartner

Global Mobile App & Ad Revenue(2008-2011E, Billions)

$0

$5

$10

$15

2008 2009 2010 2011E

Mobile Advertising Mobile Apps

Waves of Innovation

First 6 Quarters Cumulative Unit Shipments (Millions)

Source: Apple

 ‐

 10

 20

 30

 40

 50

 60

Q1 Q2 Q3 Q4 Q5 Q6

iPod iPhone iPad

$0.7B

$12B

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Cloud Computing Spending

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$17$23

$33$43

$61

$87

2008 2009 2010 2011 2012 2013

Cloud Computing Spending(2008‐2013, $ Billions) 

Source: Deloitte, Cloud Computing Forecasting Change

• Mass efficiency driving into all business models

• Exponential leap in always‐on processing power

• Massive amounts of data generated and collected in real time

• Analytics providing ground breaking real‐time business insights

What does this mean?

Waves of Innovation

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Email Alternatives Comparison($/User/Month)

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

On PremiseExchange

ExchangeOnline

Power, Space,Cooling

Staffing

Archiving Software

Storage Hardware& Software

Client Software

Server Hardware

SaaS Fee

Gmail

Source: Wikibon, Securely Moving to the Cloud

• Basic utilities like email drop to 25% of conventional price

• Organizational simplicity with less staffing

• Unprecedented flexibility for companies and applications

Cloud Computing Cost Efficiency

Waves of Innovation

$28.39

$12.50

$7.47

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Ecommerce Innovation

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Technology Merges with Marketing

• Smartphones have become direct‐response tools in consumer’s pockets

• This is changing the way we shop

Implications to Retailers

• CRM platforms must track customers across all channels

• Marketing must be tracked and optimized across all channels

Waves of Innovation

Source: KPCB, Internet Trends

0%

5%

10%

15%

20%

Q12010

Q12012

eCommerce Y/Y Growth

Mobile Commerce as % of Ecommerce

US Ecommerce (2010-2012 1Q)

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Discussion Agenda

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What to Do?

It’s The End of The World As We Know It

Waves of Innovation, Unprecedented Opportunities

...Companies Refocus On Their Customers

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M&A to Focus on the Customer

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• Creates a comprehensive social relationship platform for consistent brand experiences and customer service across all channels/media 

• Seeking social data management and analytics capabilities

• Rising demand by consumers to engage with brands across multiple social channels

• CMOs looking for integrated social marketing platforms

• Cloud‐based social marketing and engagement platform

• Helps customers amplify their social community engagement

• Develop campaigns across social networks/devices and publish content that drives leads

M&A to Focus on the Customer

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• Cross‐channel marketing via suite of customer‐centric marketing services to better connect clients with their customers

• Leading provider of data, analytics

• Demand quickly growing for more data‐driven/complex marketing

• Marketers moving away from channel marketing to personalized data‐driven conversations

• Pioneer in interaction management technologies 

• Enables marketers to create fully integrated, cross‐channel conversations through mobile, Web, social, email channels

M&A to Focus on the Customer

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• Rolling out standard e‐circular platform in local markets nationwide

Consortium led by:

• Valuable legacy FSI/circular business

• New competitors challenging with local deals and coupons

• Local and national retailers demanding new channel

• Local online e‐circulars platform, deep expertise in handling various types of offers

• Strong technology base and newspaper relationships

M&A to Focus on the Customer

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• Amazon packers working with Kiva robots may be able to fulfill 3‐4 times as many orders per hour

• Expect Amazon to offer warehouse logistics to other retailers

• Historically competing on breadth of products and price

• Rising share of units shipped sold by other merchants via Amazon infrastructure

• Success with Amazon Web Services in making own infrastructure available to others

• Makes robots used in shipping centers to simplify operations and reduce costs

• Handling technology and sophisticated software

• Fulfills the need for rapid order fulfillment

M&A to Focus on the Customer

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• Defends and extends Facebook dominance in photo sharing and expands reach beyond Facebook‐controlled social graphs

• Social networking behemoth

• Fast‐growing mobile arena demands innovation 

• Photo sharing across social graph critical to early popularity

• Breakthrough mobile photo‐sharing app

• Grew 35 million consumers to quickly share photos

M&A to Focus on the Customer

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• Challenged to deliver software for how enterprise users will work in the future 

• Sharing files, new types of messaging, managing work flow

• Stiff competition from low‐cost software providers

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• Adds more social‐related features to Microsoft Office to better compete against Google

• “Facebook of the workplace” –creates private social networks within companies

• File‐sharing tools and software with free social‐networking features

• 4 million+ corporate users

M&A to Focus on the Customer

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M&A State of Play

Record M&A Volume, Driven by Mid-Size Deals

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Strategic buyers active• Strong balance sheets – U.S. non‐

financials hold $2+ trillion in cash

PE firms reengaging• ~ $400 billion investable capital• Financing gradually rebounding

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M&A State of Play

Digital Sectors Lead The Charge

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Industry SectorNo. of   Deals

Value (millions)

No. of   Deals

Value (millions)

No. of   Deals

Value

B2B Online Media & Technology 17 $182 23 $2,838 (26%) (94%)

B2C Online Media & Technology 70 $1,540 78 $3,357 (10%) (54%)

Business‐to‐Business Media 9 $63 4 $15 125% nm

Consumer Magazines 16 $83 7 $1,421 129% (94%)

Database & Information Services 20 $3,862 11 $564 82% nm

Education Information, Technology & Training 12 $516 12 $463 0% 12%

Exhibitions & Conferences 14 $258 6 $34 133% nm

Marketing & Interactive Services 145 $3,081 57 $1,922 154% 60%

Mobile Media & Technology 30 $682 23 $469 30% 46%

  Total 333 $10,267 221 $11,081 51% (7%)

Media, Information, Marketing Services & Technology M&A Activity

2012 2011

January ‐March January ‐ March % Change

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Discussion Agenda

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What to Do? ...Companies Refocus On Their Customer

It’s The End of The World As We Know It

Waves of Innovation, Unprecedented Opportunities

A Few Predictions

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Predictions

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...It’s Not The End of the World

Prediction #1

(but it is the end of the world as we know it)

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Prediction #2

Retail Transformation

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… And online purchases surpass offline retail...as the distinction between online, mobile and retail disappears...

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Prediction #3

The Long-Term Value of Facebook is Zero...

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...unless they get your credit card information

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Prediction #4

AppScape

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A really smart person will develop the “AppScape” which will create one common interface to pull all relevant info from the 800 apps on your iPhone...Sound familiar?

Marc AndreesenAppScape

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Prediction #5

Google Will Buy Oregon and British Columbia

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… just to mess with Microsoft

Beauty, eh!

JEGI likes this.

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Prediction #6

Obama and Romney tie and become Co-Presidents

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...because that model works really well

Since 1987

June 21, 2012www.jegi.com

150 East 52nd Street 18th FloorNew York, NY 10022

Phone: (212) 754‐0710Fax: (212) 754‐0337

The End of The World As We Know It: Innovation & Growth in Digital Services